In the first inflation reading under the revised CPI series (base: 2024=100), India’s CPI inflation rose to 2.75% YoY in Jan-26 from 1.33% (as per the old series) in Dec-25. This marks the steepest annualized increase since May-25 (2.82% as per the old series), following a record low of 0.25% in Oct-25 (as per the old series). With this, Jan-26 also marks the first instance in four months that inflation has moved above the lower bound of the tolerance band, although it remains below the 4.0% target for the twelfth consecutive month.

Key highlights of Jan-26 data

• On a sequential basis, CPI posted an increase of 0.3% MoM, in contrast to the series median contraction of -0.2% MoM usually seen in the month of January. (as per old series)
• Annualised Food & Beverages inflation rose to 2.11% in Jan-26, marking the end of a four-month streak of deflation in food prices when compared with the old series. Having said, on a sequential basis, food prices continued to contract for the second consecutive month by 0.04% MoM (as per the revised series), with no sustained build-up in food price pressures through much of FY26. 
• Under the revised classification, over half of the classes within the Food & Beverages basket recorded sequential price increases for Jan-26, led by Meat (+4.15% MoM), Fish & other seafood (+1.88% MoM), Fruits & Nuts (+1.86% MoM), Ready-made food & other food products (+0.33% MoM) and Services for processing primary goods for food (+0.14% MoM). 
• While the sequential increase in food prices was partially offset by decline in Vegetables, tubers, plantains, cooking bananas & pulses (-3.89% MoM), the remaining price corrections were concentrated within the Beverages category, including Water (-0.19% MoM), Soft drinks (-0.17% MoM), Tea (-0.12% MoM) and Other beverages (-0.11% MoM).
• Consolidated fuel inflation eased to 0.2% in Jan-26 compared with 1.6% YoY in Dec-25 (as per the old series). A sharp sequential decline was seen in the price of PDS Kerosene (-2.08% MoM), followed by LPG cylinder and piped natural gas Coal (-1.04% MoM), which offset the improvement in Firewood and chips (+0.67%), Electricity (+0.5% MoM), Biogas and gobar gas (+0.24% MoM) and Coal (+0.15% MoM) among others. 
• Core CPI inflation (represented by the CPI excluding indices of Food & Beverages, Electricity, gas and other fuels, and petrol, diesel & other fuels items within the Transport division) stood at 3.7% YoY. Note that core CPI as per the older series had risen to a 28-month high of 4.8% YoY in Dec-25. 
  1. Core-Core CPI inflation (represented by the exclusion of gold, silver, diamond, platinum jewellery & other items from Core CPI) remained at 2.1% YoY (from an earlier series low of 2.4% YoY in Dec-25).

Inference and Outlook

Jan-26 CPI inflation highlights the following developments –

Vegetable prices, inherently sensitive to weather and supply disruptions, eased for the second consecutive month, although having undershot the typical winter-season correction despite an early onset of colder conditions. At an item-wise level within vegetables, garlic was the only item to record a sequential double-digit gain, followed by increases in parwal, jackfruit, lady’s finger and onions, while double-digit contractions were observed in potatoes, tomatoes, brinjal and other vegetables.

Having said, the near-term outlook on food prices remains favourable. The above-normal monsoon outturn last year, along with comfortable reservoir levels, has enabled timely and robust progress in Rabi sowing, which should help sustain the comfort in food prices into early FY27 as harvests commence from Apr-26. As of 30^th Jan-26, 106.1% of the normal area has been sown, driven by higher wheat acreage.

Furthermore, with the first inflation print under the new series, the divergence between headline and core CPI inflation has narrowed sharply to 1 percentage point, the lowest in FY26, indicating more aligned and relatively less food-driven volatility in overall inflation dynamics, given the reduced weight of food in the revised series.  

Some of the emerging upside risks that one needs to be watchful of:  

• The cumulative ~6% depreciation in the INR seen in FY26 so far poses upside risks to imported inflation. Based on standard pass-through estimates, a 5% rupee depreciation could directly add ~15–20 bps to headline CPI, with the impact rising to ~35 bps after accounting for indirect effects. Having said, easing external headwinds supported by the anticipated conclusion of the interim India-US trade deal have partly alleviated currency pressures and are expected to support a more favourable inflation outlook. 
• Meanwhile, international commodity prices have firmed up amidst geoeconomic, geopolitical, and monetary policy uncertainties. On a FYTD (Jan-26 over Apr-25) basis, the IMF’s Commodity Price Index is up by 7.2%, led by a 15.8% jump in industrial metals, 65.8% jump in precious metals, and 38.8% jump in rare earth metals.
• Recovery in domestic consumption underpinned by lagged impact of RBI’s monetary policy support via 125 bps of cumulative rate cuts, overall surplus monsoon outturn last year, FY26 budgetary provision of income tax relief, GST rate cuts could continue to add some demand-led upward bias to core inflation in the medium term.

With only the inaugural reading available under the revised CPI series, drawing firm conclusions on the underlying inflation trend remains premature. A clearer and more reliable assessment will emerge only after observing more data prints.

Overall, we maintain our FY26 CPI inflation estimate at 2.1%.

Table 1: Hierarchical category classification in old and new CPI Series